Safe and Sound

First Western Federal Savings Bank

Rapid City, SD
5
Star Rating
Started in 1979, First Western Federal Savings Bank is an FDIC-insured bank based in Rapid City, SD. The bank holds equity of $8.1 million on assets of $53.8 million, according to December 31, 2017, regulatory filings.

With 9 full-time employees, the bank currently holds loans and leases worth $50.1 million, including real estate loans of $50.7 million. U.S. bank customers currently have $40.2 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Western Federal Savings Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three important criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors during times of economic trouble for the bank. Therefore, when it comes to measuring an an institution's financial resilience, capital is key. When looking at safety and soundness, the more capital, the better.

First Western Federal Savings Bank scored 22 out of a possible 30 points on our test to measure the adequacy of a bank's capital, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Western Federal Savings Bank's Tier 1 capital ratio was 28.75 percent, exceeding the 6 percent level considered adequate by regulators, and higher than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather financial headwinds.

Overall, First Western Federal Savings Bank held equity amounting to 15.01 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as unpaid loans.

A bank with large numbers of these types of assets could eventually be forced to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a future failure.

First Western Federal Savings Bank fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.97 percent of First Western Federal Savings Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Western Federal Savings Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, increasing its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, diminish a bank's ability to do those things.

On Bankrate's test of earnings, First Western Federal Savings Bank scored 24 out of a possible 30, better than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. First Western Federal Savings Bank's most recent annualized quarterly return on equity was 15.25 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.2 million on total equity of $8.1 million. The bank reported an annualized return on average assets, or ROA, of 2.22 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.